Redbox rakes in green

February 23, 2009|Heidi Prescott

How many times do you find yourself standing in line at the Redbox? If these lines tell you anything, they reveal how DVD rentals from the big red machines at Martin's, Wal-Mart, and other stores across our region have resulted in a successful venture for parent company Coinstar. Read on... And then, let's talk Redbox etiquette. First, the story from Advertising Age. YORK, Pa. -- Those wallet-friendly $1 DVDs dispensed by big, red boxes at McDonald's, Walmart and other retailers have catapulted to the top impulse buys in the front of the store. And all those singles are adding up to a big chunk of change for Redbox parent Coinstar. "It's convenient and it's inexpensive," said Infonetics Research analyst Jeff Heynen. "Every time I go to the grocery store, there's a line in front of the Redbox." Even as sales of DVDs slide -- they were down 9% to $14.5 billion last year, according to Digital Entertainment Group -- Redbox rentals increased 180% to $400 million in 2008, driven by new units, though even existing units posted robust 52% same-store-sales growth. Chief Operating Officer Paul Davis, who will become Coinstar's CEO in April, predicted in a fourth-quarter earnings call with analysts that Redbox sales will climb another 80% this year to reach $650 million to $700 million. Redbox estimates it already has more than a 9% market share of DVD rentals, but Mr. Davis said that share can go much higher, as evidenced in two of Redbox's more-established markets, Houston and Denver, which each have 20% market share. Coinstar also owns the smaller DVD Express. Gary Lancina, Redbox's VP-marketing, acknowledged that the economy is having an effect on Redbox's success, but added, "Redbox was doing well before the economy turned south. In hard times, great brands with great value propositions will continue to do well." While the $1 price is certainly a big draw for Redbox, its allure also includes convenience, location and new releases, which are added every Tuesday. Redbox users also can return the movies to any machine, and they can go online to see the contents of a particular box and reserve a movie for later pickup. Mr. Lancina, whose background includes a stint as a senior brand manager at S.C. Johnson, said Redbox has established itself as a brand, just like a bar of soap. "It's a 6-foot-tall package," Mr. Lancina said. "It has to do the same thing as a package good. We have to use that to grab consumers' attention, engage them and want to interact with the product." If you're not a Redbox user, do you know about free movie Mondays? Register at www.insideredbox.com and you'll receive a code to use for a free movie rental any time Monday. Just hit "rent with a promo code" on the Redbox touchscreen and then enter the code. For those who use Redbox, is there certain etiquette to follow when you're using the machines? Meaning, is this a place to spend time perusing movie titles, or do customers/renters expect it to be a fast-paced transaction?